Oil fell sharply on Thursday, with North Sea Brent down more than $6 per barrel, after the International Energy Agency said 60 million barrels of oil would be released from strategic stockpiles to help the global economy.

The announcement comes after Opec failed to raise production at a meeting on June 8 and despite assurances from Opec's biggest producer Saudi Arabia that it would lift supplies unilaterally.

"Greater tightness in the oil market threatens to undermine the fragile global economic recovery," the IEA said.

The IEA said it would release 2 million barrels per day (bpd) over 30 days onto the world market to fill the gap in supplies left by the disruption to Libya's output. Libya was exporting about 1.2 million bpd.

Analysts and traders said they had not expected the move:

"I'm really surprised. Everyone's been saying they've got enough stocks. This should keep WTI (US crude) under the $100 (per barrel), but really we want Brent there, and this should help," said Robert Montefusco, broker at Sucden Financial.

The move came as the oil market fell sharply amid worries over global fuel demand following higher-than-expected US jobless claims, forecasts of lower US growth and evidence of a slowdown in Chinese manufacturing.

Brent crude futures for August fell $6.11 to a low of $108.10 a barrel before recovering slightly to around $109.10 by 2:25 p.m., after settling $3.26 a barrel higher at $114.21 on Wednesday.

US crude dropped more than $5.00 to a low of $90.32.

New US claims for unemployment benefits rose more than expected last week, a government report showed on Thursday, suggesting little improvement in the labour market this month after employment stumbled in May.

The sell-off also followed a move by the US Federal Reserve on Wednesday to cut its growth forecasts for the world's biggest economy. – Reuters